Closing time on your home or cottage purchase is always an exciting time. If all goes as planned, all that’s left to do on closing day is sign your documents, hand over your cheque or transfer the funds, get those new keys and start your big move. However, many people can get tripped up in the closing costs if they haven’t previously budgeted for them, and that can put a damper on any new home celebrations.
We’ve outlined the key real estate closing costs you should know about beyond your down-payment, so you can avoid any last-minute surprises and enjoy your new home purchase:
- Taxes – Land Transfer Tax & GST/HST
All property purchases involve land transfer taxes, even if it’s a condo, cottage, cabin, or vacant lot. This tax goes to the provincial government (covering health care costs, education, highways, emergency services and so on). The amount you pay is based on the fair market value of the land, not necessarily what you paid for the property. For example, a home or cottage worth $700,000 in Huntsville will have an additional cost of $10,475 in land transfer taxes. The good news is that first-time home buyers may be eligible for a refund for all or part of the land transfer tax they must pay, up to a maximum of $4000. Your Realtor or your real estate lawyer should walk you through those costs at the time of purchase so that you can plan accordingly.
If you have purchased a newly constructed home, condo or cottage, you may be subject to paying GST or HST. Be sure to ask your Realtor or real estate law team if you qualify for any rebates.
- Inspection Fees
A home inspection is always recommended, unless you are buying a new build that has a full warranty. A home inspection is valuable in determining the overall condition of the home and what work, if any, is needed. While the costs of a home inspection may vary, you can count on paying $300 – $500 on average.
- Insurance
There are a few different types of insurance required for any home purchase. For example, if you have less than 20% saved towards your down payment, it’s mandatory in Canada to pay for mortgage insurance (typically through CMCH), which protects you and your lender in case of a default on a mortgage.
Title insurance, although optional, is a recommended expense you may wish to consider, as it provides the purchaser with protection against property liens or any other issues that may be related to any previous owners and outstanding debts related to your new purchase.
Finally, your home will need property/content insurance to cover any theft, fire, floods, accidents, injuries and so on.
- Reimbursements on pre-paid bills
It’s not uncommon for homeowners to pay in advance for their municipal property taxes, condo fees, or utility bills such as hydro or natural gas. As a result, the amounts that have been pre-paid that happen to cover the time period after the closing date will have to be reimbursed by the new owners. It’s not fair that the previous owners should have to pay for taxes and services on a home they no longer own.
- Legal fees
If you’ve worked with a real estate lawyer in the past, you know the value of their expert services. A good real estate law team helps safeguard you and your investment and will have your best interests in mind. Not only do they do their research, inspect every document, and give sound advice, they help protect you from costly, unexpected surprises.
Here at Ares Law, we specialize in real estate law and we understand all the ins and outs of real estate transactions, including the added expenses, like closing costs, that can potentially trip you up. Our legal team has the experience and dedication you need! If you are buying or selling a home or cottage in the Parry Sound or Muskoka region, call the Ares Law team today at (705) 746–6444 to set up an appointment and let’s get started.
